A monetary plan for upgrading climate finance and support the low-carbon transition

J.C. Hourcade, C. Cassen
DOI:  10.12910/EAI2015-014

A “global peaking of GHG emissions” compatible with the 2 °C target demands a deep restructuration of the existing capital stock in developed countries and massive redirection of infrastructure investments in developing countries to prevent them from locking in carbon-intensive development pathways. Climate policies can stimulate a sustainable and inclusive climate finance, in line with the call of the Cancun Agreement for a paradigm shift in climate negotiations. The mechanism described in this article is based on the adoption by Parties to the negotiations of a social value of carbon to trigger a wave of low carbon investments in the world. Governments provide a guarantee on a given amount of carbon assets that will allow central banks to open credit lines in order to cut the risk to invest in low-carbon investments.  A share of the carbon assets could contribute to the Green Climate Fund. A future agreement in Paris next year should support this type of mechanisms.